Old Mutual launches cash plus return product driven by hedge funds
Old Mutual Asset Managers has launched an investment plan designed to deliver cash plus returns in all market conditions with a high level of dynamic protection.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
The key to this product is its investment approach. The capital growth will come from a fund invested in an actively managed combination of a diversified hedge fund portfolio and cash. OMAM currently manages over USD 1.5 billion in hedge funds, including multi strategy hedge fund portfolios.
The new Old Mutual Prosper 80 Bond, which was seeded by OMAM with over USD 42 million in April 2005 and will be available to investors in September 2005, rises every time the fund price reaches a new high. It has a target return of cash plus 4 per cent each year, after charges, and aims to achieve this with low volatility compared with equity funds and an equivalent or lower risk investment to corporate bond funds.
The bond also offers a protected price of 80per cent of the highest ever fund price -- each time the fund price reaches a new high, the protected price rises. The protected price is equivalent to at least 80 per cent of an investor's ongoing fund price and is provided by Barclays Bank plc.
The cash benchmark for USD version is Federal Funds Target Rate <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />US and for EUR version is ECB Minimum Bid Refinancing Rate 1 Week.
Old Mutual Prosper 80 Bond offers a number of key benefits which make it an extremely flexible investment, including:
- No lock-in period
- No redemption penalties
- An open-ended structure - with weekly pricing and weekly dealing
- Low minimum investment - USD 10,000 or EUR 10,000.
Unlike traditional investments, hedge funds use established methods, which can make money in both rising and falling markets. Many hedge funds are also able to use these methods to deliver very stable returns with low volatility. The multi manager approach adopted by OMAM combines its own managers with high quality, external specialist managers. OMAM's Multi Strategy Products team employs a highly systematic and controlled investment approach which combines different managers, strategies, asset classes and regions, aiming to build an optimum portfolio with the potential to deliver stable, cash plus returns with low downside risk.
Investments are held within the OMAM managed account platform, rather than funds. This means the investment team has full transparency of underlying holdings for more efficient portfolio management and full legal title to the assets.
"The rationale for this new product is very simple," says Charles Bathurst, head of hedge fund distribution. "There is no doubt that many investors are nervous about the volatility of stock market investments and the downside risk of losing capital but are looking for a healthy return on their money. We are using our proven and specialist investment capabilities to offer a highly flexible investment with the real potential of cash plus returns in all market conditions and a high and dynamic level of capital protection.
"Hedge funds are a very significant asset class with an estimated USD 1,000 billion of assets under management. Traditionally the preserve of very wealthy investors and increasingly utilised by institutions, investors have been attracted by the ability of hedge funds to deliver positive returns in all market conditions with superior risk-adjusted returns. We strongly believe that these characteristics should make hedge funds popular with many private investors whatever their reason for investing - for retirement, school fees, mortgages or to find a home for existing money. We expect Old Mutual Prosper 80 Bond - with its built in flexibility - weekly dealing, no lock-in periods, no redemption penalties and low minimum investment, combined with ongoing capital protection, will appeal to lots of investors."
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